Updated April 9, 2012, 12:06 p.m. ET.

Kepco Unit, Vitol Sign $3.4 Billion LNG Deal .

By MIN-JEONG LEE

SEOUL—Korea Midland Power of South Korea said Monday that it had struck a $3.4 billion deal with Switzerland-based Vitol SA to buy liquefied natural gas under a long-term contract.

The deal marks the first successful attempt by a unit of Korea Electric Power Corp. at buying LNG directly from an overseas supplier instead of making purchases from state-run Korea Gas Corp.

The Kepco power-generating unit, known as Komipo, will buy 400,000 metric tons of LNG a year from Vitol from 2015 to 2024, it said in a written statement.

The deal with Vitol comes with an option for Komipo to purchase more than the initially contracted volume, depending on changes in market prices.

The company didn't disclose price details but said the deal was signed at a "relatively competitive price" compared with recent long-term deals signed with other Asian countries.

The 400,000 tons account for about 17% of the company's annual LNG needs. The deal volume is "quite small," compared with what had been expected, Woori Investment & Securities analyst Chang Lee said.

Similar deals from South Korean companies are likely to happen "slowly," over a long period, while the impact of the deal on Komipo's earnings will depend on how much cheaper the LNG is in comparison with Kogas prices, Mr. Lee said.

As Komipo doesn't have an LNG terminal, it will use Posco's terminal, a person familiar with the matter said.

South Korea has four LNG terminals in operation, of which Kogas runs three. Kogas also has a terminal in construction, with four tanks to be built by 2014.

The government has allowed companies to import LNG for their own consumption since 2001, but Kepco's power-generation units, including Komipo, had been unable to find a supplier.

An official at the commerce ministry's gas division said that other than Kogas, only Posco, GS Caltex Corp. and SK Group affiliate SK E&S buy LNG directly from overseas suppliers.

Local companies other than Kogas still aren't allowed to import LNG for trading purposes.

Write to Min-Jeong Lee at min-jeong.lee@dowjones.com

Kepco Unit Signs $3.4 Billion LNG Deal - WSJ.com